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Getting a Car Loan After Bankruptcy

You’re probably somewhat traumatized if you’ve recently filed for bankruptcy protection. After all, our society holds that individuals should feel ashamed when they can’t fulfill their financial obligations. 

So, even while the bankruptcy code exists, those who avail themselves of it are thought to be looked upon with a certain amount of disdain. They’ve also led to believe nobody will extend them credit for seven to 10 years. However, getting a car loan after bankruptcy is absolutely a possibility — if you adhere to the following advice. 

  1. Reassess Your Situation

Your first step should be to pull your credit report and make an effort to understand your current credit score. Your credit report can be had for free at AnnualCreditReport.com if you haven’t already done so within the past 12 months.

Your bank or credit union can help you find out your credit score, usually for a nominal fee. When reviewing your report, pay particular attention to how your existing car loan was treated. If you handled it well, another lender will be willing to back you. 

You’re still in the game even If it wasn’t — it’ll just be a bit more difficult.

  1. Be Reasonable

Now, with all of that said, remember, you just filed for bankruptcy protection and you’re asking someone to write you a loan for a new car. Be chill about it. Don’t try to buy the big Benz on your first outing. Go for something modest. Definitely run the numbers to see what you can afford, but even if you can go full-on luxury, it will look better if you’re demonstrating a willingness to economize. 

  1. Amass a Down Payment

Pull together a down payment of at least 20 percent of the purchase price after you’ve examined your budget to determine what you can afford. Ideally, the bankruptcy filing freed up enough cash in your budget to enable you to accrue a nice down payment. 

The more cash you have to offer, the less risk you’ll be asking the lender to take. This is a definite plus. This is particularly so when you consider you’re asking for a secured loan with the car in question serving as collateral. 

  1. Research and Approach Several Lenders

Look for lenders noted for working with people who have had credit problems — being careful to avoid buy here/pay here lenders and other shady operators who prey upon people with credit issues. You don’t need to walk around with your head down just because you have a filing on your record. 

Many online lenders will write you a car loan if your information is on point and you look like a reasonable risk. To that end, gather all of your pay stubs, your credit report and tax information so you can have it on hand to make your case. 

Limit your application activity to a single day, so it will be looked upon as one inquiry by the credit reporting agencies. This will help preserve your credit score as much as possible. 

  1. Make Your Payments on Time

Once a lender agrees to front you the cash, look upon it as the great opportunity it represents. This is your chance to begin rebuilding your reputation. The best way to do that is to meet each and every requirement of the loan agreement to the “T.” Doing so could improve your credit score by as much as 52 points.

  1. Be Ready to Refinance the Loan

Look into converting the loan to one with a lower interest rate after you’ve had it for a year or so — having always made your payments on time. The likelihood of this succeeding is high if you’ve been diligent about servicing all the other accounts you may still have as well.

Again, getting a car loan after bankruptcy is definitely doable. Yes, you’ll be looking at a higher interest rate and maybe some slightly unfavorable terms. But you can turn all of that around within a year and get back on the road to solvency if you’re careful.


  1. Mary A Ambrosino says

    Very good advice on restarting your credit while being able to afford much needed transportation.